The European Commission announced Wednesday, Mar. 4 that it would introduce a legislative proposal on alternative investments that will include private equity and venture capital. The legislation will likely cover all forms of alternative investment, be based on a registration regime, and include high level principles on transparency and disclosure, a unified code on these areas based on existing industry codes, some restrictions on leverage at the manager/general partner level and a set of supervisory arrangements.

The Commission's announcement follows a hearing on Thursday, Feb. 26 in which the European Private Equity and Venture Capital Association ("EVCA"), Europe's private equity trade body, proposed a oversight and enforcement regime that would shift from a system of self-regulation to a supervisory model. The EVCA offered to create a pan-European code of conduct to cover reporting, valuation, transparency and disclosure, governing principles and corporate governance guidelines. The EVCA also offered to establish an enforcement regime subject to oversight by the appropriate EU or national bodies.

The Commission's proposal is expected by April 22. While the EVCA's submission will likely not be reflected in the Commission's proposal, it will likely "help shape the Commission's thinking of the proposed legislation," said EVCA Chairman Jonathan Russell in a letter to members. "The legislative process could take up to two years to complete and the industry will have considerable opportunity to influence this process and the legislative outcome," said Russell.

The head of the Commission has stated that regulatory initiatives will focus on "gaps" not currently covered by national legislation or industry codes.

European Commission Communication is available here (PDF)

Full Story: Buy-Out Industry Bows to EU Code, FT.com (Feb. 26, 2009)